The Aberdeen Global – Indian Bond Fund will invest in a portfolio of local currency corporate and ‘quasi-sovereign’ bonds.
Aberdeen said the timing reflects its belief that Asian debt fundamentals are ‘improving but mis-priced.’ Prime Minister Modi’s structural reforms and the credibility of Rajan at the Reserve Bank of India are ‘a potent combination,’ in Aberdeen’s view.
The Aberdeen Global – Asian Credit Fund is pan-regional and will feature mainly investment grade plus high yield hard currency issues.
Aberdeen said ‘solid trade and current account balances’ underpin economies in the region, while the risk-return profile of corporate issuers is also attractive.
This anomaly is in part technical, with global and emerging market benchmarks not providing much exposure to Asia, Aberdeen said. Aberdeen’s view is that Asia should be considered a discrete fixed income market. The investment universe for such a market market contains over 800 issues from over 300 issuers across 15 countries.
The company is seeding the Indian Bond Fund from internal allocations so the fund will have around US$60m at inception, while the Asian Credit Fund will start at US$10m.
“The fundamentals of the Asian credit and, especially, Indian bond, markets are compelling yet investor perceptions have not yet caught up,” said Victor Rodriguez, head of Asia Pacific Fixed Income at Aberdeen.
“This is a part of the world where growth and savings are being generated and where policy makers are largely on top of events,” he added. “In India the term structure of interest rates is in decline and that is very positive. Elsewhere, we find attractive real yields backed by decent, sustainable cashflows. When there is so much anxiety globally about inflated asset prices Asian debt would seem to offer good pricing and long-term diversification potential.”